Public Corporations
Boy Scouts of the Philippines, G.R. No. 177131, June 7, 2011
FACTS:
This case arose when the COA issued Resolution No. 99-011 on August 19, 1999 ("the COA
Resolution"), with the subject "Defining the Commission’s policy with respect to the audit of the Boy
Scouts of the Philippines." In its whereas clauses, the COA Resolution stated that the BSP was created as
a public corporation under Commonwealth Act No. 111, as amended by Presidential Decree No. 460 and
Republic Act No. 7278; that in Boy Scouts of the Philippines v. National Labor Relations Commission, the
Supreme Court ruled that the BSP, as constituted under its charter, was a "government-controlled
corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP is
appropriately regarded as a government instrumentality under the 1987 Administrative Code."
ISSUE:
Whether the BSP continues to be a public corporation or a government instrumentality, hence,
subject to the exercise by the COA of its audit jurisdiction in the manner consistent with the provisions of
the BSP Charter
RULING:
The Constitution emphatically prohibits the creation of private corporations except by a general
law applicable to all citizens. The purpose of this constitutional provision is to ban private corporations
created by special charters, which historically gave certain individuals, families or groups special
privileges denied to other citizens.
It may be gleaned from the above discussion that Article XII, Section 16 bans the creation of
"private corporations" by special law. The said constitutional provision should not be construed so as to
prohibit the creation of public corporations or a corporate agency or instrumentality of the government
intended to serve a public interest or purpose, which should not be measured on the basis of economic
viability, but according to the public interest or purpose it serves as envisioned by paragraph (2), of
Article 44 of the Civil Code and the pertinent provisions of the Administrative Code of 1987.
The BSP is a Public Corporation Not Subject to the Test of Government Ownership or Control and
Economic Viability
The BSP is a public corporation or a government agency or instrumentality with juridical
personality, which does not fall within the constitutional prohibition in Article XII, Section 16,
notwithstanding the amendments to its charter. Not all corporations, which are not government owned
or controlled, are ipso facto to be considered private corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise known as "public corporations." These
corporations are treated by law as agencies or instrumentalities of the government which are not subject
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Public Corporations
to the tests of ownership or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative relationship to the
government or any of its Departments or Offices.
Classification of Corporations Under Section 16, Article XII of the Constitution on National Economy and
Patrimony
The dissenting opinion of Associate Justice Antonio T. Carpio, citing a line of cases, insists that
the Constitution recognizes only two classes of corporations: private corporations under a general law,
and government-owned or controlled corporations created by special charters.
We strongly disagree. Section 16, Article XII should not be construed so as to prohibit Congress
from creating public corporations. In fact, Congress has enacted numerous laws creating public
corporations or government agencies or instrumentalities vested with corporate powers. Moreover,
Section 16, Article XII, which relates to National Economy and Patrimony, could not have tied the hands
of Congress in creating public corporations to serve any of the constitutional policies or objectives.
In his dissent, Justice Carpio contends that this ponente introduces "a totally different species of
corporation, which is neither a private corporation nor a government owned or controlled corporation"
and, in so doing, is missing the fact that the BSP, "which was created as a non-stock, non-profit
corporation, can only be either a private corporation or a government owned or controlled corporation."
Note that in Boy Scouts of the Philippines v. National Labor Relations Commission, the BSP,
under its former charter, was regarded as both a government owned or controlled corporation with
original charter and a "public corporation." The said case pertinently stated:
While the BSP may be seen to be a mixed type of entity, combining aspects of both public and
private entities, we believe that considering the character of its purposes and its functions, the statutory
designation of the BSP as "a public corporation" and the substantial participation of the Government in
the selection of members of the National Executive Board of the BSP, the BSP, as presently constituted
under its charter, is a government-controlled corporation within the meaning of Article IX (B) (2) (1) of
the Constitution.
We are fortified in this conclusion when we note that the Administrative Code of 1987
designates the BSP as one of the attached agencies of the Department of Education, Culture and Sports
("DECS"). An "agency of the Government" is defined as referring to any of the various units of the
Government including a department, bureau, office, instrumentality, government-owned or -controlled
corporation, or local government or distinct unit therein. "Government instrumentality" is in turn
defined in the 1987 Administrative Code in the following manner:
Instrumentality - refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying operational autonomy
usually through a charter. This term includes regulatory agencies, chartered institutions and
government-owned or controlled corporations.
The same Code describes a "chartered institution" in the following terms:
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Public Corporations
Chartered institution - refers to any agency organized or operating under a special charter, and
vested by law with functions relating to specific constitutional policies or objectives. This term
includes the state universities and colleges, and the monetary authority of the State.
We believe that the BSP is appropriately regarded as "a government instrumentality" under the
1987 Administrative Code.
It thus appears that the BSP may be regarded as both a "government controlled corporation with
an original charter" and as an "instrumentality" of the Government within the meaning of Article IX (B)
(2) (1) of the Constitution.
The existence of public or government corporate or juridical entities or chartered institutions by
legislative fiat distinct from private corporations and government owned or controlled corporation is
best exemplified by the 1987 Administrative Code cited above, which we quote in part:
Sec. 2. General Terms Defined. – Unless the specific words of the text, or the context as a whole,
or a particular statute, shall require a different meaning:
xxxx
(10) "Instrumentality" refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes regulatory agencies, chartered
institutions and government-owned or controlled corporations.
xxxx
(12) "Chartered institution" refers to any agency organized or operating under a special charter,
and vested by law with functions relating to specific constitutional policies or objectives. This
term includes the state universities and colleges and the monetary authority of the State.
(13) "Government-owned or controlled corporation" refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations, to the extent of at least
fifty-one (51) per cent of its capital stock: Provided, That government-owned or controlled
corporations may be further categorized by the Department of the Budget, the Civil Service
Commission, and the Commission on Audit for purposes of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such corporations.
Assuming for the sake of argument that the BSP ceases to be owned or controlled by the
government because of reduction of the number of representatives of the government in the BSP Board,
it does not follow that it also ceases to be a government instrumentality as it still retains all the
characteristics of the latter as an attached agency of the DECS under the Administrative Code. Vesting
corporate powers to an attached agency or instrumentality of the government is not constitutionally
prohibited and is allowed by the above-mentioned provisions of the Civil Code and the 1987
Administrative Code.
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